The municipal and parish councilmen that Venezuelans elected on Dec. 3, 2000, assumed office in January 2001. This act completed Pres. Hugo Chávez Frías’s demolition of the post-1958 system of the political parties that had governed Venezuela over four decades. Chávez’s Fifth Republic Movement and its ally, the Movement to Socialism, as well as other political parties opposed to the previously dominant Democrat Action (AD) party and Social Christians, had captured 72% of all municipal and parish council seats. On October 25, however, the pro-Chávez parties suffered a stinging rebuke when their candidates ran for leadership positions in the Venezuelan Confederation of Workers. The defeat was so overwhelming (unofficial tallies gave the pro-Chávez slates less than 10% of the total vote) that the National Electoral Council had not released the results as of mid-November. The victorious forces were the same groups that for more than four decades had been part of the AD and the Social Christians. Their victory did not signal the return to favour of these organizations, however. Rather, it indicated that organized labour had emerged as an autonomous political force in Venezuela, one whose support future governments could not take for granted.

Chávez saw his plans to remake Venezuela in the image of his leftist ideology derailed on several other fronts. First, in May he introduced legislation into the National Assembly that would have increased the national government’s control over education, private as well as public. Proposals that required the imposition of government overseers with powers to dismiss administrators and teachers evoked intense opposition from the Roman Catholic Church and associations of middle-class parents whose children attended public schools. Chávez and the governing political party backed away from what threatened to become an ugly and possibly violent confrontation. In addition, they declined to press the influential association of taxi drivers when the drivers resisted attempts to regulate them and to integrate them into the ruling political party. Finally, the Chávez government even had difficulty in controlling the capital city of Caracas. The 1999 constitution provided for the election of a “high mayor” to replace the appointed Federal District governor, traditionally the highest local executive authority in Caracas. The first elected high mayor of Caracas was Alfredo Peña, once Chávez’s chief of staff. Peña broke with the president, successfully resisted his efforts to control the capital city police forces, and even suggested that it would be necessary to remove the president in a revocatory referendum (provided for in the constitution). On December 10 the business group Fedecámaras and the one-million-strong Confederation of Venezuelan Workers staged a nationwide strike to protest new economic laws—involving the agriculture, fishing, and oil industries—that they believed would “lead the country to economic disaster.” Thwarted at every turn, Chávez seemed unable to use his personal popularity to make the changes that he proclaimed as central to his so-called Bolivarian Revolution.

Venezuela’s central bank reported that the economic recovery that had begun in the second quarter of 2000 slowed in the third quarter of 2001. The communications sector failed to sustain earlier rates of growth, and the financial sector did not recover from the contraction that it experienced in 1999 and 2000. On November 1 the central bank reported that inflation was running at roughly 10% for the year, down slightly from 2000. Private consumption, which had fallen by 15% between May 1999 and May 2000, grew by 5% during the first half of 2001. Total public-sector debt stood at 31% of the country’s gross domestic product, up from 29% for 2000.

The Chávez government’s handling of foreign policy created two important problems for Venezuela. First, insurgency continued to simmer in neighbouring Colombia, and Chávez’s ambiguous position toward the rebel cause raised tensions with Bogotá and Washington. The U.S. government was especially unhappy with Venezuela’s unwillingness to allow overflights by military aircraft attempting to track drug-smuggling guerrillas. Second, after U.S. Pres. George W. Bush initiated the bombing of Afghanistan in October, relations between Venezuela and the U.S. deteriorated further when Chávez equated civilian casualties from the bombing with the deaths caused by terrorists on September 11. As well as isolating the Chávez government within the Western Hemisphere, this position hardened opposition by the government’s domestic critics.